By Charles Nwaoguji
Lagos Chambers of Commerce and Industry (LCCI) has express concern over the Central Bank of Nigeria (CBN) circular of 24th August which directs that Form M for Letters of Credit, Bills for Collection and other forms of payment should only be opened in favour of the ultimate supplier of a product or service.
According to the Director General of LCCI, Mr. Muda Yusuf , While the Chamber appreciates the efforts of the CBN in curbing abuses in the foreign exchange market, this policy measure would create more problems than it would solve. Already most foreign exchange transactions have been frozen on account of this circular. What this means is that the supply chain of over 80 percent of the business community has once again been disrupted and dislocated. This is like substituting the global supply chain problem with a domestic supply chain disruption.
The Director General noted that it is impractical to expect all importers of raw materials, equipment, and other inputs to buy directly from the ultimate producer, manufacturer, or supplier, especially in an economy driven by SMEs.
Even in the domestic economy, he said “distributors and dealers form the bridge that connects the major manufacturers to the retailers and consumers. Middlemen play a critical role in the supply and distribution chain in any economy, domestically and globally. They bring a great deal of value to the process.”
He urged the CBN to please review this new policy on payments for imports to save the already ailing and distressed Nigerian economy from complete collapse.
He stated that many businesses are yet to recover from the devastating shocks of the Covid 19, adding that some have in fact collapsed, while others are struggling to regain momentum.
He noted that this policy negates the current laudable efforts by the government [and even the CBN itself] to ensure business continuity, sustainability, and recovery. It is also in conflict with the letters and spirit of the Economic Sustainability Plan of the Federal Government.
He pointed out that the SMEs are the most vulnerable and would be the first set of casualties of this policy for they do not have the capacity to place huge orders that the main producers or manufacturerswould require.
“Many of them currently enjoy suppliers’ credit from the agents from whom they buy, a privilege they would not get from the original product manufacturers. Some enjoy up to six months bills for collection on raw materials imports.
“The liquidity crisis in the foreign exchange market has worsened the perception and country risk of Nigeria in the international trade arena as many foreign payment obligations are not being met. Some domestic investors havein fact lost their foreign credit lines as a result. This naturally creates difficulty in doing business with the main manufacturers or suppliers,” he explained.
As a way forward, he called for urgent reviewed of the policy to avoid further disruptions to businesses.